Zimmer to buy Abbott's spine unit

September 05, 2008|By FROM TRIBUNE NEWS SERVICES

Zimmer Holdings Inc., maker of replacement hips and knees, has agreed to buy Abbott Laboratories' spine division for about $360 million in cash.

Abbott's spinal business posted $109 million in 2007 sales, representing a tiny fraction of the pharmaceutical and medical-device heavyweight's total sales of $25.9 billion. Abbott Spine, which makes products such as screw systems and clamps for surgery, has about 300 employees worldwide.

The acquisition will reduce Zimmer's adjusted earnings by about 3 cents a share in the fourth quarter and by as much as 10 cents in 2009, excluding one-time charges, the firm said Thursday. The deal is expected to close in the fourth quarter.

Zimmer, based in Warsaw, Ind., expects to record an in-process research and development charge of about $50 million in the fourth quarter and to step up the value of acquired inventory by about $25 million. The company also expects to incur $40 million to $50 million in restructuring and integration costs from the deal.

North Chicago-based Abbott sees a one-time pretax gain of at least $150 million.

Zimmer's spine business is relatively small, with 2007 sales of $197 million, representing about 5 percent of its total sales on the year.

"In addition to bringing great products and a promising pipeline, the Abbott Spine acquisition will add to our research and development capabilities in the spinal category and will strengthen our sales coverage," said David Dvorak, Zimmer's president and chief executive.